Key Takeaways
Drug pricing reforms, changing tariff proposals, evolving international trade deals, and regulatory uncertainty are all impacting pharmaceutical manufacturing investment and outsourcing strategies.
Pharma companies need to be flexible and agile with compliant and redundant manufacturing capabilities, which is leading them to diversify outsourcing partnerships and at the same time expand in-house capacity.
The Trump administration’s Most-Favored-Nation (MFN) initiative and 15% tariffs on pharmaceutical goods have led to numerous announcements of investments in U.S. manufacturing capacity.
Even so, these unilateral trade and tariff policies could lead to significant structural disruptions in the global supply chain with serious, negative consequences with respect to drug pricing and availability.
Major pharms companies appear to be taking a balanced approach, combining increased in-house capacity and strategic outsourcing partnerships with service providers offering end-to-end support across technologies, drug phases, and geographies.
Outsourcing Background
Drug pricing reforms, changing tariff proposals, evolving international trade deals, and regulatory uncertainty are all impacting pharmaceutical manufacturing investment and outsourcing strategies.1,2 Much of the activity is emanating from the Trump administration, which enacted the Inflation Reduction Act, launched the Most Favored Nation (MFN) initiative, has proposed and walked back a variety of different tariffs, made numerous trade deals, withdrawn funding for scientific research, and made major personnel changes at the Food and Drug Administration (FDA), leading to new regulatory approaches. Other factors include the increasing complexity and diversity of the pharma pipeline and demands by governments for local supply of drug products.3
In this constantly shifting environment, drug developers are facing several decision-making challenges with respect to R&D budgets, manufacturing investments, and outsourcing strategies.4 Pharma companies need to be flexible and agile with compliant and redundant manufacturing capabilities, which is leading them to diversify outsourcing partnerships and at the same time expand in-house capacity, particularly in the United States and China.2 Outsourcing to contract development and manufacturing organizations (CDMOs) with networks of sites around the world via long-term strategic partnerships (rather than on a transactional basis, as was previously common) helps reduce costs and provide access to specialized expertise while ensuring resiliency, local positioning, and compliance across regulatory authorities.5
Indeed, higher funding levels and expansion of preclinical pipelines bodes well for outsourcing in 2026.4 Big pharma companies already outsource close to 50% of R&D, with smaller biotechs reaching even higher levels.5 This high level of outsourcing reflects not only the potential cost savings and specialized expertise offered by CDMOs. It also reflects the significant investments these service providers have made in advanced technologies and capabilities. Many CDMOs, including those in emerging markets, have invested heavily in state-of-the-art quality control and automated inspection systems, process analytical technology, continuous manufacturing platforms, and specialized capabilities supporting the production of novel therapies, as well as enhanced workforce training.
Outsourcing introduces some risk, which must be effectively managed through comprehensive CDMO qualification, such as through use of the Rx-360 Supplier Assessment Program, which assesses the quality management systems, regulatory compliance, operational performance, risk management capabilities, and sustainability and ethics programs of potential outsourcing partners.6
One of the biggest risks associated with heavy reliance on outsourcing, particularly to limited geographic regions, is increased fragility in the supply chain, as revealed by the COVID-19 pandemic.7 Indeed, one of the biggest challenges for the pharma industry is its heavy reliance on imports from Asian countries. The United States, for example, imported nearly $213 billion in pharmaceutical materials in 2024, including approximately 70% of the active pharmaceutical ingredients (APIs) used to make final drug products (largely generics), which all came from China alone.8 The U.S. Pharmacopeia estimates that the United States manufactures just 15% of APIs in branded drug prescriptions sold in the country, with slightly more that 40% coming from Europe.9
The disruptions to global pharmaceutical supply chains during this challenging period continue to drive interest in reshoring manufacturing in key markets, particularly the United States and Europe, which has the potential to impact outsourcing. Both countries have been implementing policies and incentives to encourage domestic manufacturing.6 Getting new capacity up and running takes time and money, however, and may lead to higher drug prices, which conflicts with government actions to drive them down.
Pharma companies are looking at in-house expansions as well as partnering with integrated CDMOs offering duplicate manufacturing capabilities in multiple, disparate geographic locations.10 The biggest CDMOs, meanwhile, are building out capabilities to ensure they are able to support clients from discovery through clinical trials and commercial manufacturing across small and large molecule manufacturing, including next-generation therapies and drug-delivery systems, to meet global market needs.
The U.S. MFN Initiative and Tariffs
In the United States, the Trump administration has taken several steps to encourage expansion of domestic manufacturing and drive down drug prices. The Most-Favored-Nation (MFN) Policy, initiated in an executive order in May 2025, requires the U.S. Department of Health and Human Services (HHS) to base drug prices in America in accordance with the lowest prices paid for equivalent products in other high-income nations.11 If companies do charge lower process in other countries/markets, they will face tariffs.12
In September 2025, President Trump announced 100% tariffs on imported branded or patented pharmaceuticals (i.e., excluding generics) effective October 1 of that year. However, any companies with construction of manufacturing facilities in the United States underway could avoid the tariffs.13
Initial Industry Repones: Increasing U.S. Investment in Manufacturing Capacity
The response by major pharmaceutical companies to the MFN imitative and 100% tariffs announcements was quick and noteworthy. Several firms cut MFN deals with the Trump administration and/or committed to adding new U.S. production capacity, including AbbVie, Amgen, Biogen, Bristol Myers Squibb, Cipla, CSL, Genentech, Gilead Sciences, Eli Lilly, GlaxoSmithKline, Johnson & Johnson (which also agreed to invest in a new FUJIFILM Biotechnologies CDMO manufacturing site), Merck, Novartis, Novo Nordisk, Roche, and Sanofi.12–14
These newly announced investments continue a trend that was already underway, in part due to anticipation by pharma companies of moves by the Trump administration such as took place last year.13 This trend is revealed in GlobalData’s foreign direct investment (FDI) report, which found a 53% drop in outbound U.S. pharma FDI in 2024 along with an 837% increase in inbound pharma FDI that year.15 FDI from Europe to the United States, for instance, increased 787% between 2023 and 2024. IQVIA estimates approximately $600 billion worth of investments in the United States were announced by 17 big pharma companies between September 2024 and September 2025.13,16 Of course, whether these pledges will come to fruition remains to be seen.16
Potential Impacts of Tariffs on the Global Pharma Supply Chain
The unilateral trade and tariff policies instituted by the Trump administration in the United States have the potential to impact not only U.S. drug makers but the entire global pharmaceutical supply chain.8 Advancement of the BIOSECURE ACT is further complicating the situation by limiting outsourcing to Chinese-based CDMOs and contract research organizations (CROs). There is significant concern that these moves combined will ultimately lead to notable structural disruptions that will limit access to critical reagents, assay kits, and comparator drugs for use in R&D and clinical development; drive up costs of APIs and intermediates used to produce branded drug products; place local fill/finish facilities under pressure; increase risks for advanced therapies; and impact patient access to medications.8,17 They can also drive up the cost of drugs, which also conflicts with the Trump administration’s stated goal of reducing drug prices.9
Furthermore, in addition to increasing U.S. drug prices, tariffs are predicted to worsen current drug shortages, increase the cost of outsourcing, and drive manufacturers to seek alternate markets.15 Delays in investments could also result due to the uncertainties surround how the tariffs will be implemented.13 That raises questions about how much of the announced investments in the United States will actually come to fruition. There is also the potential for other countries to pursue so the “invest-or-tariff” approach, which could lead to increased inefficiencies in the supply chain.
Looking outside the United States, U.S. trade and tariff policies have consequences for Europe.11 Companies may launch drugs in the United States first, delaying launches in European countries to avoid setting low price caps. That would delay access for Europeans. Companies may also raise prices on European drugs to recoup compressed margins in the United States. More concerning is the potential for companies to simply not introduce drugs into European markets to avoid having to lower U.S. prices. So far, the European Commission has taken a wait-and-see stance.
Recent Outsourcing Shift to Europe Despite Tarriff Challenges
Despite the significant investments in U.S. manufacturing capacity announced by big pharma companies, a recent GlobalData report found that these same companies are relying more heavily on European CDMOs than they have in the past.18 Following a decline in contract manufacturing delas in both the United States and Europe from 2020 to 2023 due to the COVID-19 pandemic and a subsequent recovery in both the United States and Europe between 2023 and 2024. In 2025, outsourcing deals rose dramatically in Europe and declined domestically. Nine out of 14 U.S.-based pharma companies participated in 13 European outsourcing delas that year, while less than half of these companies established just eight outsourcing partnerships with U.S.-based service providers. In addition, pharma companies are also investing in in-house capacity in Europe as well as in the United States.
These moves suggest the growing recognition of the need for a diversified, global supply chain to ensure security of supply during turbulent times with respect to geopolitical instability, uncertainty in U.S. politics, and the growing threats resulting from climate change.
Balance is Needed
It is apparent, in fact, that pharmaceutical companies are now pursuing a more balanced approach to manufacturing and supply, using a combination of outsourced and in-house production to meet market needs and ensure supply chain security.7 When taking this approach, they are considering numerous factors, including cost-effectiveness, efficiency, and resilience.
These decisions must be made against the backdrop of uncertain trade and tariff policies coming from the United States. The recent Supreme Court ruling against President Trump’s use of the International Emergency Economic Powers Act to establish emergency import taxes has, for instance, raises questions about the validity of trade deals signed with UK, Switzerland, Japan, the European Union, and other countries/regions.19 It also could affect the MFN drug pricing initiative given that tariff threats drove many of the announced pharma company investments in new U.S. manufacturing capacity.
It is also important to recognize that the tariffs do not affect generics and biosimilars and thus do not serve as a driver for increased production of these lower-cost options, which account for approximately 90% of U.S. prescriptions.20 They are also unlikely to reduce drug shortages. Tariffs work best when there are applied in a targeted manner, rather than using a broad approach and when used as just one element of a multipronged strategy that includes tax incentives, addresses regulatory uncertainty, and establishes strong quality and safety expectations for both domestic and imported products.
Overall, drug makers need to establish transparent, global, flexible supply chains that leverage in-house and outsourced manufacturing to ensure not only access to necessary expertise and low-cost solutions, but the ability to meet requirements for in-country final product manufacturing while also achieving efficient redundancies in support of greater resiliency.9,18
References
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2. Slabodkin, Greg. “2026 is the year of pharma manufacturing supply chain efficiencies.” 2026 Pharma Prediction & Trends Pharma Manufacturing e-book. Mar. 2026.
3. “Pharma outsourcing trends 2025: Partnership, precision, and resilience.” European Pharmaceutical Manufacturer. 1 Sep. 2025.
4. Slabodkin, Greg. “2026 outlook for biopharma outsourcing is ray of light as JPM26 kicks off.” 2026 Pharma Prediction & Trends Pharma Manufacturing e-book. Mar. 2026.
5. Lange, David. “Outsourcing in Pharmaceutical Manufacturing: Enhancing Quality While Managing Risk.” Weaver. 31 Mar. 2025.
6. “Outsourcing in Pharma: A Comprehensive Guide to Strategic Advantages and Considerations.” National Science Foundation. 4 Jul. 2025.
7. Douglas, Colleen. “Globalization and Outsourcing in Pharma Manufacturing: Navigating a Shifting Landscape.” LinkedIn Pulse. 31 Oct. 2024.
8. Murphy, Flynn. “How Trump’s trade war will break global medicine supply chains.” BMJ. 389: vr648 (2025).
9. Barrie, Robert, and Annabel Kartal Allen. “Drugmakers point to US expansion plans amid Trump’s 100% drug tariff.” Pharmaceutical-Technology.com. 26 Sep. 2025.
10. Sawlani, Sarthak and George Moss. “What’s driving pharma outsourcing in 2025 and beyond?” ECI Partners. 4 Jul. 2025.
11. Frendesen, Christoffer. “How Trump’s Most-Favored-Nation Policy Is Forcing Europe’s Pharma Industry to Reconsider Its Pricing Strategy.” PharmaSource Podcast. 9 Mar. 2026.
12. Garguilo, Louis. “Trump's Big Pharma Deals Drive CDMO Investments.” Outsourced Pharma. 14 Jan. 2026.
13. Cole, Christopher. “How 100% Pharmaceutical Tariffs Will Impact Domestic Manufacturing and Supply Chains.” Pharmaceutical Technology. 26 Sep. 2025.
14. “Global drugmakers rush to boost US presence as tariff threat looms.” Reuters. 9 Mar. 2026.
15. Chapman, Tom. “How Trump's Tariffs Could Impact the Pharma Supply Chain.” Supply Chain Digital. 2o Feb. 2025.
16. Slabodkin, Greg. “Big Pharma's $600B US Manufacturing Commitment: Fact or Fiction?” LinkedIn. Mar. 2026,
17. Ilancheran, Mathini. “100% U.S. Drug Tariffs: Implications for Pharma and Outsourcing.” Clinical Leader. 17 Oct. 2025.
18. FDA-approved drug manufacturing deals shift to Europe, says GlobalData. GlobalData. 7 Apr. 2026.
19. Sagonowsky, Eric. “Supreme Court steps in: Trump's emergency tariffs struck down.” Fierce Pharma. 20 Feb. 2026.
20. Gorman, Monica. “Tariffs Alone Won’t Fix Weakened Drug Supply Chains.” Pharmaceutical Executive. 16 Jul. 2025.
